Updating our Asset Allocation

As we move nearer to early retirement, we’re making steps to change our asset allocation.  Previously, we were pretty aggressive in stocks, and we’re slowly starting to reduce that exposure.  We were 15% bonds, 5% real estate, 20% international (15% developed), 10% small/micro cap and the rest (50%) in total stock market.  Over the last 5 years, I consolidated the international to only developed (20%), and 55% in total market, 5% in small/micro cap.  This year, I’m moving to 17% bonds, 53% total market (the rest the same).  It’s been nice to capture some of our gains over the last year – and our allocation was way out of whack at the end of the year thanks to the markets. Next year, I’ll move to 20/50, and slowly move to a 40/40 (bonds, total market, but reduce international to 10) over the next 5 years.  I will probably rebalance once per quarter this year as I tweak our 40k/403b contribution percentages to get them on autopilot for the next year or so.

I use a spreadsheet I created to monitor our asset allocation across multiple accounts – especially since I don’t want to be selling/buying in our taxable account.  It has worked well, and lets me know when we’re more than 1% out of our desired allocation.

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